Amazon’s announcement last month that it will launch new own-label brands, including products like tea and coffee, babyfood and snacks, is an interesting move given own label is under increasing pressure.
Amazon has sold own-label products before, but this is the first move into the food sector.
According to the report Private Label in Western Economies [IRI 22 June 2016], overall own label’s value market share in Europe as a share of the total fmcg market fell 0.6 points to 38.3% in 2015.
UK retailers (as measured by Kantar Worldpanel UK), including the discounter channel, saw growth of 0.4 points, taking own label to an impressive 52% value share of the total fmcg market.
S0 the UK remains the strongest market for own label, but for how long? It has been a tough year both in the UK and in other markets as price wars continue to be waged and shoppers are less incentivised to buy supermarkets’ own-label ranges to help them save money. On average, packs of own-label products sell for 30% less than national brands, but this is changing and the price gap is closing. IRI’s UK shopping basket data shows own-label prices are slowly getting closer to brands as own-label trade promotion support is reduced and promotion among national brands is increased.
Retailers’ range reductions are having an impact on own label as well. The overall average reduction across 2015 was -5%, but in one major multiple it was -10%. Although own-label ranges have been reduced more quickly than national brands, the latter are also being seriously impacted, as fmcg retailers focus on cutting their range and assortment to encourage higher performance by categories and brands.
Then there are the discounters. Supermarkets are losing own-label sales to the discounters, primarily from the economy end of own-label ranges. In France there has been a strong decline in own-label economy and standard tiers, diluting healthy growth for the premium ranges. If the premium range of own label is where retailers should look for growth, it will be interesting to see how challengers like Amazon cope in this market.
Tim Eales is director of strategic insight at IRI